"Porsche Wins Dismissal of Hedge Fund “Short Squeeze” Lawsuit"

It was a classic corner. My first thought was Northern Pacific 1901
where the stock went from under $100 to $1000 during the squeeze.
Although the VW squeeze was only half the magnitude it had the same
effect, the speculators sell everything else as they desperately try to
locate stock to cover. First up, the headline story from FT Alphaville:

Difficult
to say, of course, but we’d be sellers of the €30bn figure being banded
about by newspapers as they struggle to explain how speculators
borrowed shares in Volkswagen, not knowing they belonged to Porsche,
sold them, and then seemingly had to buy them back (from Porsche) at
five times the price, before giving them to Porsche. (We won’t address
the pref side of the trade!)>>>MORE

Next, some truly pathetic whining from the hedge funds via the Telegraph...

From DealBook:

A New York state appeals court dismissed a lawsuit brought by hedge funds against Porsche on Thursday, handing the German automaker a big victory in the long-running legal battle over its controversial takeover of Volkswagen.

The
Appellate Division decided that the hedge funds lacked jurisdiction to
bring a lawsuit in a New York state court, ruling that there was an
inadequate connections between New York and the facts of the case. The
opinion reverses a trial court ruling this past summer that had upheld
the action. The decision also mirrors a federal court ruling two years
ago that bounced the hedge funds claim.

“The only alleged connections between the action and New York are the
phone calls between plaintiffs in New York and a representative of
defendant in German, and the e-mails sent to plaintiffs in New York but
generally disseminated to parties elsewhere,” said the brief opinion.
“We find that these connections failed to create a substantial nexus
with New York, given that the events of the underlying transaction
otherwise occurred entirely in a foreign jurisdiction.”

The
litigation stems from historic “short squeeze” in the shares of
Volkswagen in 2008. For years, hedge fund speculators had followed
Porsche’s protracted attempt to gain control of Volkswagen.

Several
dozen hedge funds had put a large bet in place that Volkswagen would
decline in value because they thought Porsche had stopped buying
Volkswagen stock. But in October 2008, when Porsche disclosed that it
owned a 75 percent stake in Volkswagen, shares of Volkswagen spiked and
the funds absorbed huge losses when they closed out their negative bet,
or short positions.

The hedge funds — a group that included Elliot
Associates, Viking Global Equities, and Glenview Capital Partners —
accused Porsche of misleading investors about its stake in Volkswagen.
They argued that Porsche should have disclosed its Volkswagen position
much earlier than it did, and committed securities fraud by making
deceptive public statements about the holding.

They first filed a lawsuit in federal court. A federal judge in Manhattan dismissed that case in December 2010, citing a 2010 United States Supreme Court
ruling — Morrison v. National Australia Bank — that severely limited
shareholders’ ability to sue a foreign company in the United States if
that company’s shares traded on an overseas exchange. The hedge funds
have appealed that decision to the federal appeals court....MORE

...The company’s former chief executive, Wendelin Wiedeking, was charged with making false public statements in 2008 about its plan to acquire Volkswagen.

Also charged was Holger Härter, Porsche’s former chief financial
officer, who was thought to be the mastermind of the takeover plan,
which involved the use of complex financial derivatives....

And besides the hedge funds mentioned in the DealBook story there is another €2 billion lawsuit which Bloomberg reported in December 2011:

...The investor group’s complaint alleges that “Porsche
gained control over the price of VW common stock as it secretly
built enormous derivative positions covering almost all of VW’s
freely traded shares, then triggered a massive short squeeze,
and finally released billions of euros worth of shares into the
short squeeze for its own profit,” according to the statement....